California has just passed Assembly Bill (AB) 749 resolving an ambiguity under current case law by generally prohibiting an employer from requiring, in settling an employment dispute, that a current or former employee agree not to obtain future employment with that employer.

A similar issue arose last year in Golden v. Cal. Emergency Physicians Med. Grp., in which the Ninth Circuit Court of Appeals ruled that the no hire provision contained in a settlement agreement between a physician and his former employer, a physician medical group, constituted a “restraint of a substantial character” on the physician’s medical practice and therefore violated California’s non-compete law, Business and Professions Code section 16600.  Specifically, the Ninth Circuit found that the agreement’s preclusion of the physician from working at “any facility owned or managed by” the employer was lawful but that it violated Section 16600 to the extent that it permitted the employer to terminate the physician from employment with any medical facility where the employer contracts or may later contract for services.

AB 749 expands on this Ninth Circuit ruling by barring any agreement to settle an employment dispute from containing a provision “prohibiting, preventing or otherwise restricting” the employee from obtaining employment with the employer or “any parent company, subsidiary, division, affiliate or contractor of the employer.”  Significantly, the law only applies in circumstances where Continue reading →